Conventional annuity rates have fallen 8% since June 2009

The latest findings from the MGM Advantage Annuity Index, which tracks the income paid on enhanced and conventional annuities on a quarterly basis, reveals that in the three months between September 2010 and December 2010 the average conventional rate fell by 1.04% while the average enhanced rate fell by 2.12%. 

Since June last year, the average conventional and enhanced rates have fallen a staggering 7.94% (6.06% since November 2009) and 7.32% (6.07% since November 2009).

Craig Fazzini-Jones, Director at MGM Advantage comments, "These findings are very alarming.  People in retirement are living longer with an ever diminishing pot of money. Given this, the need to shop around for the best possible annuity rate is becoming ever more imperative."

The Index also reveals that the gulf between the income paid on top and bottom quartile conventional annuities is continuing to grow. Looking in particular at the standard annuity market in September 2010, the average difference for men was 16.26% compared to 17.82% in December. The corresponding figures for women are 16.29% and 17.94%. 

According to research conducted in December, the difference between an average standard annuity and an average enhanced annuity is 22.83%. Over the average retirement, this amounts to £11,682.74 for men and a massive £13,148.40 for women on a pension pot of £50,000. Between September and December 2010, the difference between the top and bottom rates paid by enhanced annuities for men was 18.23%, down from 19.37% between June and September 2010.  For women, the difference decreased 0.14% to 15.19% from 15.33%.

Given the overall trend for falling annuity rates in conventional and enhanced annuity rates, MGM Advantage says that greater consideration should be given to alternative retirement income solutions that can really make the most of people's retirement savings.

In February this year, MGM Advantage launched a new and unique asset backed annuity - the Flexible Income Annuity. While the gap between top and bottom quartile conventional annuities continues to grow, the Flexible Income Annuity can offer the potential for investment growth, an income that can provide a natural hedge against inflation and it also comes with a minimum income guarantee for peace of mind.  One of the problems with level conventional annuities is that income is fixed for life and falling rates means this income is shrinking all the time.